In the opening sequence of the HBO series, Newsroom, the anchor is participating in a public forum at an East coast US university (in Boston). During the Q&A, he is asked by a student (“a sorority girl”) in the audience, who is suitably bright-eyed and full of American blather, “Is America the greatest country in the world?” He initially blusters but the convener of the forum pushes him for a “human moment” and what follows is 3 classic minutes of TV, starting with “its not the greatest country in the World, Professor, that’s my answer” and concluding with “So when you ask what makes us the greatest country in the World, I don’t know what the fuck you are talking about. Yosemite?”. He then said among other things that “We used to be …”, “we stood up for what was right”, “we waged wars on poverty, not poor people”, “we aspired to intelligence, we didn’t belittle it” and more. The latest shenanigans in the US Congress where the GOP representatives have become a mindless rabble is certainly testimony to the sort of things the mythical Newsroom anchor was talking about in the series. The Sydney Morning Herald article (October 16, 2013) – US shutdown stalemate enters realm of the absurd – reports on how the GOP reps do not “agree either on tactics or strategy” and Boehner announced to the press that there had been “no decisions about what exactly we will do”. This is one day before the lunatic right-fringe of their party is intent on causing mayhem. My prediction – some ridiculous deal will be done and the US government will not default. We will see. But today I am providing a little glimpse into examination processes by using what might have been a first-year answer to an examination question to highlight some important points. I hope you enjoy the little window into life at a university.

There was an interesting Working Paper issued by the ILO – Is aggregate demand wage-led or profit-led? – last year, which finally received some coverage in the mainstream economics press this week. The Financial Times article (October 13, 2013) – Capital gobbles labour’s share, but victory is empty – considered the ILO research in some detail. That lag is interesting in itself given that it was obvious many years ago that the trends reported in the ILO paper and the FT article were part of the larger story – that is, the preconditions – for the global financial crisis. If you look back through the Modern Monetary Theory (MMT) literature, dating back to the 1990s, you will see regular reference to the dangers in allowing real wages to lag behind productivity growth. It seems that the mainstream financial press is only now starting to understand the implications of one of the characteristic neo-liberal trends, which was engendered by a ruthless attack on trade unions by co-opted governments, persistent mass unemployment and underemployment, and increased opportunities by firms to off-shore production to low-wage nations. Better late than never I guess.

Today marks the beginning of – Anti-Poverty Week – in Australia and elsewhere. The overwhelming reason people are poor is because they are unemployed (or underemployed). There are related reasons associated with poor housing etc, but the fact remains that if we eliminate mass unemployment by providing enough work for all those who desire it and ensure there are jobs for those with multiple disadvantages then we will reduce poverty overnight. While poverty is persistent, it wasn’t always thus. I have been to many meeting where policy makers, usually very well adorned in the latest clothing, plenty of nice watches and rings, and all the latest gadgets (phones, tablets etc), wax lyrical about how complex the poverty problem is. I usually respond at some point (trying my hardest to disguise disdain) by suggesting the problem is relatively simple. The federal government can always create enough work any time it chooses at a decent wage to ensure that no-one needs to live below the poverty line. Read: always! It can also always pay those who cannot work for whatever reason an adequate pension. Read: always. If we run out of real resources which prevent those nominal payments (wage and pensions) translating into an adequate standard of living, then the government can always redistribute the real resources by increasing taxes on those who have “too many” resources at their disposable. Too many is a relative concept in this context. The so-called complexity of the problem is just code for an unwillingness of the policy makers to use the capacity they have as currency issuers. There is nothing complex about announcing that the government will pay a living wage to anyone who wants to work – just turn up tomorrow and the wage begins. If that announcement was made then we would know who wants to work for a wage and those who do not. For Anti-Poverty Week – the best thing the government can do is announce the unconditional job offer.

There was an article in the UK Guardian (Australian) edition last week (September 27, 2013) which carried the title – Can Labor be blamed for rising unemployment?. The Labor government, which was tossed out of office in Australia on September 14, had been in power since late 2007. They inherited an unemployment rate of 4.4 per cent (which dropped 3 months later to 4 per cent on the tail end of the growth phase), an underemployment rate of 6.2 per cent (total labour underutilisation rate of 10.7 per cent), a participation rate of 65.6 per cent and an employment-population rate of 62.7 per cent. By the time we got sick of them, the unemployment rate was 5.8 per cent and rising, the underemployment rate was 7.8 per cent and rising (total wastage was 13.7 per cent and rising), the participation rate had dropped to 65 per cent (some 114 thousand workers exiting the labour force because of the lack of jobs), and the employment-population ratio had dropped to 61.2 per cent (a loss of 285 thousand relative jobs). The labour force increased by 1147 thousand over this time but employment only rose by 934 thousand, which meant that unemployment rose by 161 thousand more than if the relative scales had been maintained from November 2007. So is Labor to blame for this? Of-course it is – it was the currency-issuing government for 6 years or so. Any rise in the unemployment rate is the fault of the national government because it alone as the complete capacity to offset any reductions in employment arising from other sources such as global financial crisis, the slowdown in the Chinese economy, an appreciated Australian dollar and whatever else. The author of the Guardian article, while mounting a reasonable fight against the conservative view of the changing labour market, feels unable to admit that basic truth. So the Labor Party is obviously to blame because it was in government and could have prevented the rise in the unemployment rate.

There is a popular segment (that is, I assume it to be popular) on the national ABC television news in Australia each night. the Finance Report presents one or more graphs which motivate the presenters so-called insights into what is going on in the Australian economy. I rarely see it and when I do I tend to ignore it because the presenter is infuriating to say the least. But last night, he presented to charts which were of interest although the conclusions he drew left the “elephant” that was standing in the room unnoticed. The conclusions he drew were facile and he ignored the most obvious conclusion – that the Australian economy could only maintain growth into the future if the budget deficit was larger and on-going. That would have been a bridge too far for him to cross but that is what his data and all the other related data that he didn’t present tells us. Us – in this context – being those who understand how the macroeconomy works. So today’s blog is a reprise of the graphs (or my versions of them) with the essential commentary that might have been presented last evening and would have helped the viewers appreciate the current economic situation more fully and understand why deficits are essential in these situations.

Metaphors! They are more than a fancy way of emphasising some point – that is, their power goes beyond meagre linguistic construction. The research suggests they are part of our deep mental or neural capacity, which we draw on to sort out facts and ideas. They are conceptual devices intrinsically linked to the way we think abstractly. Metaphorical language reinforces our ideology (worldview) and so it is no surprise that political parties have become very interested in framing their messages using simple and common metaphors which resonate with the way we feel about things. George Lakoff, a cognitive linguist, considers we do not make our political choices on the basis of rational dissection of competing facts and arguments but rather respond to central (or grand) metaphors with reinforce our worldview. We thus consider facts or argument within that framework of thought. I am doing a bit of work in this area as a way of understanding why central Modern Monetary Theory (MMT) propositions (which are so patently obvious and have strong explanatory capacity) evade acceptance among people, even those who express liberal perspectives (in this context meaning – are open to new ideas).

There was an UK Guardian article today (September 23, 2013) – The American dream has become a burden for most – which argues that the narratives about the American dream are becoming increasingly recognised as a “delusional myth”. The discussion is relevant for a number of growing research agendas that attempt to construct a new understanding of what has been happening over the neo-liberal period (say, the last 3 decades), how the financial crisis occurred, why it is persisting, who underpins the well-funded campaign against budget deficits as a means of reducing unemployment and redistributing national income towards the bottom of the distribution, and how we might go about reforming/restructuring a global financial order that clearly does not work in the interests of all (make that almost everybody!). One such research agenda is emerging from the field of network analysis and some of the results to date provide a chilling picture of who controls the world financial markets and the governments and central banks that seek to regulate these markets. Essentially, if we want to engage in serious reform we have to unseat the power of some 161 individuals.

On September 7, 2013, the federal election in Australia saw the incumbent Labor Party deposed in fairly categorical terms and replaced by the “born-to-rule” conservative coalition (Liberal and Nationals). The Labor Party had been in power for two terms since 2007 after defeating the conservatives even more categorically, who had, in turn, been in power for 11 years. The Labor Party stormed to office in the 2007 federal election, taking 22 seats of coalition (and a further 1 from an independent) to hold 83 seats (primary vote 43.38 per cent, and two-party preferred 52.70 per cent). The conservative coalition was reduced to 65 seats (in the 150 seat lower house). The conservative Prime Minister lost his own seat so great was the rout. Between 2007 and 2013, the Australian Labor Party squandered that lead and in the process we had three Prime Ministers (2 different) as the Party factions conducted an internecene war. After last Saturday’s defeat, one of the Labor Prime Ministers (who had been deposed in June 2013 as a result of her total failure to win electoral appeal) wrote her assessment of the state of Labor as a result of the electoral defeat. The article – Julia Gillard writes on power, purpose and Labor’s future – is an extraordinary exercise in self-denial, despite much of it providing an assessment that I would agree with. But in the big issue – of economic credibility, Ms Gillard demonstrates why her Party was unfit to govern and why the conservatives are back in power and beginning yet another period where the rights and outcomes of workers will be attacked and dragged down. But this has only happened because of the monumental failure of the Labor Party to present a progressive alternative at a time when they had the Australian voters eating out of their hands.

There was an interesting article in the Washington Post over the weekend (September 7, 2013) – Why Keynes wouldn’t have too rosy a view of our economic future – written by – Mike Konczal. It broaches the topic of self-adjustment in capitalist monetary economies and the divide within the economics profession with respect to that topic. It also introduces the issue that the long-run trajectory of the economy is dependent on the short-run path taken (the so-called hysteresis hypothesis), which is largely ignored by those who advocated fiscal austerity. What is typically denied is that the costs of fiscal austerity are more than a temporary increase in unemployment and lost income. The intergenerational consequences and the impact on the capacity of the economy are likely to be massive.